Question

Special Deposits, Small Savings and Provident Funds are classified as capital receipts because each of them:

Options

• Reduces the government's financial assets

• Creates a liability for the government

• Is a direct tax on savings

• Is recovered from loans advanced by the government

Answer 1

Special deposits (deposits of a special nature), small savings (public savings mobilised by the government) and provident funds all create liabilities for the government. Since capital receipts either create liabilities or reduce financial assets, these are capital receipts.